Assets with a clear focus
The Church of Sweden’s work with responsible investment has been ongoing for many years and is under constant development.
Asset management is based on the financial policy adopted by the Central Board in 2010. The policy is based upon two fundamental values:
• the principle of human dignity and the concept of stewardship as reflected in international environmental and
• human rights conventions and existing frameworks for responsible business.
Based upon these two principles, asset management complements other efforts towards sustainable development within the Church of Sweden, at home and abroad. Lately, all dioceses have adopted similar policies.
The financial policy states we should be active and long-term asset owners
We attempt to impact society in positive ways through:
The companies we invest in
Our focus lies on well-managed companies that integrate sustainability into their business operations. At the same time, we do not invest in companies within controversial sectors that are considered to be problematic in light of the fundamental values of our Church. This regards for example, companies who extract fossil energy sources or manufacture weapons or tobacco.
The asset managers we select
We invest our assets in funds whose managers have a high level of expertise in integrating environmental, societal and corporate governance factors into their investment decisions.
We also contribute to new financial products being released onto the market by creating our own funds (such as SEB’s Ethos funds) and also as seed investors for new sustainability-oriented funds to be able to start.
Being active owners
We utilise our opportunities as an asset owner to influence individual companies and sectors, as well as the financial industry in general. We make our views known and choose partners who, like ourselves, aim to be responsible investors with a long-term perspective.
Corporate governance regards how a company shall be governed, regulated and controlled to satisfy owners and stakeholders. The scope of the Swedish Code of Corporate Governance also includes board responsibilities and roles, as well as auditing and reporting.
Commission, asset management model and follow-up
The commission given to us by the Central Board of the Church of Sweden places clear focus on the long-term performance of asset management for the Church of Sweden at the national level. The overall target return is 3.0 per cent per annum above inflation measured in rolling ten-year periods.
The model we employ in our asset management to achieve this target consists of the allocation of assets, choice of fund manager and follow-up.
Allocation of assets
To create prerequisites making it possible to achieve the long-term target, we use a strategic reference portfolio that we then also use as a reference portfolio when evaluating our asset management against the 10-year time horizon.
When we decide upon a reference portfolio, we base our decision upon the real target return of 3.0 per cent with a time horizon of ten years. The reference portfolio shows the optimal division among equities, obligations, securities, real estate and alternative investments so that we can reach our long-term target in relation to the risk level we have decided upon. The calculation is based upon data regarding historical returns and the correlation between asset class, as well as prognoses for expected, long-term returns in each asset class.
Choice of asset managers
When the Church of Sweden on the national level chooses asset managers, it focuses on two overall areas: the sustainability orientation in the portfolio and the capacity to deliver a stable financial return.
In regard to sustainability, the asset manager has to correspond to our requirements based upon our financial policy and investment rules concerning ethics and sustainability. The asset manager shall have a good capacity to integrate factors such as the environment, societal issues and governance in the financial analysis of the company.
Regarding financial capacities, it of course facilitates our decision-making process, if the asset manager can show positive past performance, however, in the final analysis much is based upon confidence.
Follow-up of the asset manager
In addition to the target return, we continually evaluate individual asset managers and the total portfolio. The asset managers are compared with the relevant benchmark indices. For the total portfolio, we compare returns against our weighted benchmark index. We calculate a benchmark return based upon the different asset classes’ weights in the strategic reference portfolio, which is in turn based on what each individual index has yielded in returns.
In addition to the financial evaluation, we also review the asset manager and holdings based upon our sustainability requirements using independent, external screening.